HC grants relief to Big-B, annuls IT reassessment for 2002-03

Mumbai: In a relief to maga star Amitabh Bachchan, the Bombay High Court has dismissed the Income Tax Department`s appeal against its tribunal`s order, which had rejected the department`s reassessment of the actor`s income for 2002-03 to Rs 20.05 crore from Rs 14.99 crore.

A bench of justices M S Sanlecha and S F Vajifdar dismissed the Income Tax Commissioner`s appeal in a recent judgement, upholding the Income Tax Tribunal`s order.

The IT tribunal had on March 19, 2010 ruled that the assessment officer was not justified in reopening the assessment proceedings of the actor`s income for 2002-03 under section 147 of IT Act.

The high court bench said the Commissioner of Income Tax (Appeal) as well as the Income Tax Tribunal had correctly come to the conclusion that there was no "fresh tangible material" before the assessment officer to reach a reasonable belief that some of the actor`s income, liable to be taxed, had escaped assessment.

"In the circumstances there could be no basis for the Assessing Officer to form a belief that income has escaped assessment. It is a settled position of law that review under the garb of reassessment is not permissible. We uphold the Tribunal`s order of March 19, 2010," the bench ruled.

For assessment year (AO) 2002-03, Bachchan had filed returns on 13 October 2002, declaring his income to be Rs 14.99 crore. Thereafter, on March 31, 2002, he filed revised returns declaring his total income for AO 2002-03, claiming 30 percent adhoc expenses amounting to Rs 6.31 crore and determining his income at Rs 8.11 crore.

However, before the assessment for AO 2002-03 could be completed, the actor, by a letter dated March 13, 2004, withdrew his revised returns along with his claim of deduction of 30 percent adhoc expenses from his total income.

The Income Tax Assessing Officer, however, completed the assessment for AO 2002-03 on March 29, 2005 and determined the actor`s income at Rs 56.41 crore.

Consequent to the reopening assessment notice, by an order dated December 31, 2007, Bachchan was assessed to a total income of Rs 20.05 crore. This was arrived at after adding an amount of Rs 6.31 crores as unexplained expenses under Section 69C of the said Act.

Being aggrieved, the actor filed an appeal before the Commissioner of Income Tax (Appeals) challenging proceedings under section 147 of the Act and consequent completion of assessment by an order dated December 31, 2007.

By an order dated March 4, 2009, the Commissioner of Income Tax (Appeal) set aside the reassessment order dated December 31, 2007, holding that the assessing officer had wrongly assumed jurisdiction under Section 147 of the IT Act.

Being aggrieved, the Income Tax Commissioner (Revenue) filed an appeal before the Income Tax Tribunal which held that the reasons recorded for initiating reassessment proceedings under Section 147 of the Act clearly indicates that there was no new material which had come to the notice of the assessing officer so as to lead to a reasonable belief that income assessable to tax has escaped assessment.

The ad hoc expenses of 30 per cent from the receipts was the subject matter of consideration of the assessing officer when he passed the assessment order on March, 29, 2005, under Section 143(3) of the Act. Consequently, there was no fresh tangible material for the assessing officer to initiate reassessment proceeding under Section 147.

The High Court judges observed that the Commissioner of Income Tax (Appeal) as well as Income Tax Tribunal have correctly come to conclusion that there was no "fresh tangible material" before the assessment officer to reach a reasonable belief that income liable to tax had escaped assessment.

"In the circumstances there could be no basis for the Assessing Officer to form a belief that income has escaped assessment. It is a settled position of law that review under the garb of reassessment is not permissible. We uphold the Tribunal`s order of March 19, 2010," the bench ruled.